Correlation Between Beijing Enterprises and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Beijing Enterprises and Dow Jones at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Beijing Enterprises and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Beijing Enterprises Water and Dow Jones Industrial, you can compare the effects of market volatilities on Beijing Enterprises and Dow Jones and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Beijing Enterprises with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beijing Enterprises and Dow Jones.
Diversification Opportunities for Beijing Enterprises and Dow Jones
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Beijing and Dow is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Beijing Enterprises Water and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Beijing Enterprises is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Beijing Enterprises Water are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Beijing Enterprises i.e., Beijing Enterprises and Dow Jones go up and down completely randomly.
Pair Corralation between Beijing Enterprises and Dow Jones
Assuming the 90 days horizon Beijing Enterprises Water is expected to generate 3.77 times more return on investment than Dow Jones. However, Beijing Enterprises is 3.77 times more volatile than Dow Jones Industrial. It trades about 0.09 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.14 per unit of risk. If you would invest 26.00 in Beijing Enterprises Water on August 25, 2024 and sell it today you would earn a total of 3.00 from holding Beijing Enterprises Water or generate 11.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Beijing Enterprises Water vs. Dow Jones Industrial
Performance |
| Timeline |
Beijing Enterprises and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Beijing Enterprises Water
Pair trading matchups for Beijing Enterprises
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Beijing Enterprises and Dow Jones
The main advantage of trading using opposite Beijing Enterprises and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beijing Enterprises position performs unexpectedly, Dow Jones can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dow Jones will offset losses from the drop in Dow Jones' long position.| Beijing Enterprises vs. Artesian Resources | Beijing Enterprises vs. Global Water Resources | Beijing Enterprises vs. Essential Utilities | Beijing Enterprises vs. American Water Works |
| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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